Owner of Westfield, Buckling under $32 Billion in Debt, Plans to Dump its US Malls After Huge Losses

“A management team that remains prisoner of its failed strategy that started with the acquisition of Westfield.”

Unibail-Rodamco-Westfield (URW), which, in addition to many properties in Europe, owns 27 malls in the the US, including the upscale Westfield San Francisco Center, reported a loss of €7.6 billion for 2020, after large write-downs. Its net rental income dropped by 28%.

The company, Europe’s biggest property REIT, is heavily leveraged and is in all the wrong markets at the wrong time. Besides its exposure to the ravaged brick-and-mortar retail sector, URW has a portfolio of airport shopping centers, office towers, hotels and conference halls, all of which were hammered by lockdowns, closures, travel restrictions, and cancellations.

The company’s shares responded to the news by sliding 12% on Thursday, to €57 a piece. They are now down 55% year over year and 78% from a peak of €257 in February 2015.

Now URW faces the challenge of reducing its debt in the midst of a global economic crisis. It has axed stock dividends for the next three years. It also tried to pull off a €3.5 billion rights issue last October. But that plan was shelved after a large bloc of shareholders led by French billionaire Xavier Niel and Unibail’s former CEO Leon Bressler voted down the proposal. Bressler blasted the rights issue as “a misguided act by a management team that remains prisoner of its failed strategy that started with the acquisition of Westfield.”

Unable to raise fresh capital, the company is trying to sell off a chunk of its assets before 2022, as values in the market are tumbling. On Wednesday, it announced that it will try to dump its U.S. properties that it had acquired in 2018 from Australian mall operator Westfield. In effect, it placed a €16 billion bet on a sector that was already grappling with the threat posed by e-commerce.

This left it with 27 malls in the US — 16 in California, three in Maryland and two a piece in Illinois, Florida and New York City, where it owns the Westfield World Trade Center. It also has 10 shopping centers in some of America’s biggest airport terminals, including JFK, LAX, Miami International Airport and Chicago O’Hare. It also aims to dispose of €3.2 billion in European assets by 2022.

The company’s financial report makes for painful reading, even by current standards: in 2020, URW’s malls were shut for 93 days. There were only 70 days in the entire year when they were not subject to some form of restriction. Even today, the company says that roughly half of its centers remain closed…

Continue reading the article on Wolf Street

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